SACRAMENTO, Calif. — California will be refunded $247 million it paid to a Chinese company under a major deal for protective masks after the company failed to meet a deadline for federal certification of the masks, Gov. Gavin Newsom’s administration said Wednesday.
Gov. Gavin Newsom announced the contract last month to fanfare, saying California had inked a nearly $1 billion deal for about 500 million protective masks amid the coronavirus pandemic. Most were set to be tight-fitting N-95 respirator masks, while the rest would be surgical masks. Millions of the surgical masks already arrived, but the company missed an April 30 deadline outlined in the contract for certification of the N95 masks by the National Institute for Occupational Safety and Health.
The masks were set to start arriving this month, with tens of millions planned for shipment in May. The governor’s office provided no details on what caused the certification delay.
The state paid about half the contract up front; the $247 million refund makes up roughly half of that initial payment. Under an amendment to the contract Wednesday, the certification deadline has been pushed to May 31. If that deadline isn't met, the state will get back the rest of its money in June, according to the amendment.
The state paid $3.30 per N95 and 55 cents per surgical mask under the contract. While the tighter-fitting masks are delayed, surgical masks have already started arriving in California under the deal, Newsom said. The state made another $104.7 million payment it made last week for the delivery of the surgical masks, and the amended contract makes no mention of returning that money.
Newsom said last month that the state and federal governments had “teams on the ground” in China auditing and visiting BYD’s factories.
“We are looking to make sure we do not procure what is not authorized and ultimately is not validated,” he said.
The masks must be certified through the National Institute for Occupational Safety and Health, and they were to be be tested and validated in Utah, he said. It wasn’t clear where the delay in the federal certification process occurred or whether the masks had yet arrived in the United States.
The release of the contract comes after Newsom’s administration declined for weeks to share it publicly, prompting criticism from lawmakers. On Tuesday, the state’s Office of Emergency Services and Department of General Services denied the Associated Press’ request for the contract, saying sharing it could jeopardize the delivery of the supplies.
But Newsom reversed course Wednesday, saying he wanted to share it with reporters and the public.
“We want to be as transparent as possible,” he said.
The surgical masks arrived earlier than planned, Newsom said. The governor has become confident all the supplies would arrive and is more comfortable sharing the details of the contract.
Newsom said he wants to share the contract so people can see what a great price the state paid. His administration said at the time the contract was made, other states were paying $6 to $7 per mask, with some paying more than $10 per mask.
The lack of information on the mask deal prompted criticism from state lawmakers, who said they would have had more time to vet the deal under normal circumstances. Documents from the treasurer’s office indicated Newsom’s administration hadn’t finished vetting BYD before Newsom publicly announced the contract or before his administration asked the state treasurer’s office to prepare $495 million in an initial wire transfer.
When the treasurer’s office asked for confirmation the vendor had been vetted on April 8, the day after Newsom announced the deal on MSNBC, Thomas Todd in the Department of Finance said “they’re vetting the vendor as we speak.”
The next day, an employee at the Office of Emergency Services told the treasury department that the state had worked with a “reliable NGO” to source the contract and that the federal government and “large medical supply companies” also vetted the manufacturer, according to emails.
Republican Assemblyman Jay Obernolte, vice chairman of the Assembly Budget Committee, said he wished lawmakers had seen the contract sooner. But he commended the governor's office for its handling of the certification delay.
“I think that the administration is doing the best that they can to navigate a difficult situation with certification of those N95 masks,” he said.
Associated Press reporter Cuneyt Dil contributed.